Present value of an annuity Determine the present value of $200,000 to be received at the end of each of 4 years, using an interest rate of 10%, compounded annually, as follows: a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar. First year Second Year Third Year Fourth Year Total present value b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar. c. Why is the present value of the four $200,000 cash receipts less than the $800,000 to be received in the future? The present value is less due to over the 4 years.
Present value of an annuity Determine the present value of $200,000 to be received at the end of each of 4 years, using an interest rate of 10%, compounded annually, as follows: a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar. First year Second Year Third Year Fourth Year Total present value b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar. c. Why is the present value of the four $200,000 cash receipts less than the $800,000 to be received in the future? The present value is less due to over the 4 years.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Present value of an annuity
Determine the present value of $200,000 to be received at the end of each of 4 years, using an interest rate of 10%, compounded annually, as follows:
a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar.
First year
Second Year
Third Year
Fourth Year
Total present value
b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar.
c. Why is the present value of the four $200,000 cash receipts less than the $800,000 to be received in the future?
The present value is less due to
Gover the 4 years.
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